New Rules relating to Property Managers and Letting Agents
Article written by Colin Jaque Partner in our Dispute Resolution department
Little known provisions of the Consumer Rights Act 2015 came into force on 1st October 2014 under which all professional property managers and letting agents have to register under the Redress Scheme Order 2014. A failure to register leaves the individual open to be recorded under a schedule of “rogue agents” and to a fine.
The Act imposes a duty on the local weights and measures authority to enforce these provisions in its own area and to impose a monetary penalty not exceeding £5,000 in the event of a breach. The Act also directs that the normal fine will be £5,000 unless there are “exceptional circumstances” intimated, and it is hard to envisage what circumstances might be considered as exceptional.
The Government department that drafted the legislation was the Department for Communities and Local Government which issued a memorandum in October 2014 giving a detailed explanation as to what constituted letting agency and property manager’s work and specifically intimated that the Redress Scheme would only apply to agents carrying out lettings or property management work “in the course of business”.
Specifically the Memorandum provides that it does not include informal arrangements where someone is looking after a letting or management of rented property on behalf of a family member of friend or someone working on the property employed by a landlord to carry out repairs or decorations, and nor does it include a landlord who manages the property or properties on behalf of the other joint landlords.
The memorandum goes out of its way to explain that it is only intended that registration into the Redress Scheme is limited to someone who is set up in business and is offering their services as letting agents or managers of property. Landlords are not explicitly excluded from the requirement but are not generally caught by the definitions given as they are not “acting on instructions from another party”.
Likewise, resident management companies are not explicitly excluded from the requirement to register, although, in many cases, these are not caught by the legislation. Thus, where the resident’s management company owns the freehold and manages to block itself, the Memorandum points out that there is no requirement for the company to join a Redress Scheme.
This is because, under the definition, property management work only arises where one person instructs another person to manage the premises, and, in such a case, the person who owns the block and is responsible for its management and the person managing the block are one and the same.
Also, where a resident management company does not own the freehold but is set up and run by the residents and manages the premises on behalf of the residents, this would also be excluded as the work is only in respect of the residents own premises and would not be operating in the normal course of business.
Despite this clear and unequivocal explanation which has been advertised widely by the Government Department and which has been followed by a very large number of those who have taken on management of properties where they are resident, the Tribunal has recently provided a decision that, because the advice set out in such Explanatory Memorandum does not appear anywhere in either of the Redress Schemes for letting agency work and property management work, that advice should be ignored.
Accordingly, it has confirmed that a fine of £5,000.00 should be levied on one of the directors of a company carrying out the management of an estate where that company owns the freehold interest of the individual properties comprising the estate.
Needless to say, we are looking to appeal this decision but to all those who find themselves in a position where it could be said that they are managing properties where there are more than one resident should take care to consider the possibility of registering under the appropriate Redress Scheme pending any successful appeal.
For any further information concerning this decision please contact Colin Jaque at email@example.com or on 020 7408 8888.